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Employer based, forgivable loan

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  • Employer based, forgivable loan

    I am 1 year out of fellowship from 6 years of training. I have been on an income based payment plan the whole time through training, with the plan to get PSLF eventually since it is such a long training process. I don’t think I paid any on my loans for the first year or so, because my income was zero as an MS4. Total about 204k in loans (plus a 15k private loan that I paid off immediately).

    My employer gave me 125k forgivable loan meant for student loans, although given as cash, that is contingent upon staying as staff for 5 years (obviously a fairly rural area, upper Midwest). I have saved enough to pay all 204k of my loans on top of that already, but I’m waiting to see if we getting any of my undergrad loans forgiven by old Joe B (graduate school loans are not going to be forgiven at all based on my understanding) before i press the ‘pay’ button closer to September when COVID relief expires.

    But, now I’m starting to wonder if it is not a good idea to just hold off and hope for PSLF, since this is basically 12 months months (+) of free payments with coronavirus relief on student loan interest. I would basically only have about 3.5 years left after September, 2021. Based on my information calculated on Studentaid, I would be making payments of around $2800 a month for 3.5 years = 117k. I’m not sure how much would actually be forgiven, but I assume somewhere between 40-60k, depending. Maybe a bit more if I can get those payments minimized with some other payment option. Then I could stash that 200k that I have saved into a money market account just in case.

    What would you all do? I feel like I know what most people would say based on previous posts on this forum. It’s very psychological at this point, I just want them to be gone and move on!

  • #2
    Options now are to either
    1.) Private refi and pay loans off now or
    2.) stay in IDR for 3.5 more years to receive PSLF

    The big thing you need to determine is if you want to go into a private practice or stay at your non-profit job. It sounds like you want to stay at your mid-west employer to keep the 125k. If you keep your loans federal and go for PSLF, the objective is to make the smallest payments as possible. Max your pre-tax retirement accts, HSAs, FSAs and ensure you're on the lowest paying IDR plan (REPAYE or PAYE).

    You should run the numbers in both scenarios. There are pros and cons to both options.

    Private refinance
    Out of debt sooner (~1yr)
    Lower interest rate, with option for variable interest rate
    Don't have to rely on PSLF
    Potentially higher paying job
    Peace of mind having your debt behind you
    Higher payout on loans
    No longer eligible for federal repayment or loan forgiveness
    Less savings in the bank

    Less payment towards loans
    More money in savings when loans are forgiven
    Higher interest rate
    Reliance on PSLF working out
    Out of debt in 3.5 years
    Potentially lower paying job

    Helping student loan borrowers manage their student loans. [email protected]


    • #3
      I have the cash to pay the loans now, so I don’t think I’ll bother refinancing while we are in COVID relief. I’m going to either pay them off completely in September, or minimize my monthly payments and hope for PSLF. Thanks for your thoughts!


      • #4
        No problem. Looks to be a good plan. Best of luck to you.
        Helping student loan borrowers manage their student loans. [email protected]